Conference Board of Canada economist Robyn Gibbard offers the following insights on the release of building permit data for November:
“The value of non-residential building permits rose in November, led by big jumps in both commercial and industrial building permits. Non-residential building has been experiencing a growth spurt, making it a major contributor to economic growth in 2018. The continued upward trend in building permits suggests we will see more solid growth in non-residential construction in 2019.”
—Robyn Gibbard, Economist, The Conference Board of Canada
Total non-residential building permits issued in November rose 11.6 per cent compared with October. Building permits were up 11.4 per cent year-on-year, and for calendar 2018 they are now on track to outperform 2017’s already strong showing.
Industrial building permits, which usually signal the construction of warehouse and manufacturing buildings, are down 4.3 per cent year-on-year. However, that is somewhat misleading as November 2017 was an exceptional month for permits making November 2018 look poor by comparison. Industrial building permits continue to trend upwards, and with the industrial vacancy rate at a very low 3.3 per cent, we believe the fundamentals continue to support more industrial building construction in order to meet demand.
Commercial building permits, which usually signal the construction of office and retail buildings, increased at a breakneck 28.5 per cent year-on-year. This is a sign of continued strength in the commercial building market. Office vacancy rates remain very low in some major metropolitan centres—3.1 per cent vacancy in Toronto and 4.4 per cent vacancy in Vancouver—which is contributing to strong investment.
Since the start of 2017, real non-residential building construction has grown by 10.8 per cent, making it a major contributor to economic growth. Since building permits are a leading indicator for building construction, a continued upward trend in building permits suggests that 2019 will be another strong year for non-residential construction.